Cablevision Forays into Mobile Business with Freewheel

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From: Nasdaq

Leading cable MSO (multi-service operator) Cablevision System Corp. yesterday unveiled an innovative wireless service on WiFi networks. Named "Freewheel," this service will be launched commercially in February and will be the cable TV industry's first independent venture in the wireless arena. Freewheel will provide unlimited voice, data and text on Motorola's Moto G smartphones.

The most important feature of this product is its low price. Freewheel will be available at as low as $29.95 per month for new customers whereas Cablevision's existing Optimum WiFi network subscribers will enjoy the service for just $9.95 a month. The service comes with no annual contract. Moreover, Freewheel subscribers will get the Android-based Moto G smartphone at a subsidized price of $99.95 as against the original tag of $180.

Business Diversification for Cablevision

The cable TV industry has been witnessing considerable downtrend over the last six years. The bundled triple-play services of telecom operators pose a significant threat to traditional video service providers. Telecom operators are combining 3G/4G wireless service with high-speed broadband (Internet) and video services using their extensive fiber-optic networks. To add to the woes, unprecedented growth of low-cost video streaming service providers has resulted in severe cord cutting.

A venture in the wireless market may bode well for Cablevision at this juncture. The company has already established more than 1.1 million WiFi hotspots in New York, New Jersey and Connecticut region. The Freewheel service will work anywhere in the world where WiFi network is accessible, and will operate only when the device is connected to a WiFi signal.

A Threat to Major Telecom Operators

Cablevision's latest venture may pose a major threat to leading telecom operators, namely, Verizon Communications Inc. and AT&T Inc. An average monthly telephone bill for these companies stands at least $100 a month, whereas Cablevision's service will be available as cheap as $29.95. This may significantly raise the customer churn rate of these telecom behemoths.

The telecom industry is currently going through intense pricing competition which resulted in sky high promotional charges to retain customers. For this margins are deteriorating putting pressure on the bottom line. Further, the rate of growth of the top-line also decreased due to the availability of cheaper substitutes.

Meanwhile, tech giant Google Inc. has also decided to enter the mobile market using the wireless-WiFi combo technology. This will position the company as a mobile virtual network operator leveraging the wireless networks of either Sprint Corp. or T-Mobile US Inc. or may be even both. These wireless networks will be combined with Google's WiFi hotspots to offer a state-of-the-art voice, data and text service. Google is likely to roll-out this service by mid-2015.

Concerns Remain

Cablevision's Freewheel product may become a game changer for the wireless industry. However, few factors associated with the service raise concern. The whole business model rests on the proper integration of wireless and WiFi networks. Any technical glitch will result into continuous data packet drop and frequent interruption of services.

Also, the service will be initially available on only Moto G smartphones in which Cablevision's video and voice app installed. We do not know how the service will work with other devices and operating systems.

The Bottom Line

Thriving WiFi networks throughout the U.S. has become a major concern for large wireless operators. A recent study conducted by Cisco Systems Inc. revealed that currently more than 90% of mobile data is transmitted through WiFi networks. If this trend continues, it may severely jeopardize the existence of national wireless service providers, who have already invested significantly on installation of high-speed 4G LTE networks.

Tags: Cablevision Freewheel WiFi phone